Economic anxiety may be all in our heads. But our heads may be right

It's hard to believe Phil Gramm said the U.S. is only in a "mental recession." These are times of tremendous economic anxiety: consumer confidence is sagging, banking and housing sectors are verging on panic, and the Bush Administration is scrambling to soothe markets. Now a key adviser to John McCain says the economy is some kind of psychological thing?

Well, Gramm has a point, even if McCain is acting as if he never met the guy. It's no coincidence that economic terms like anxiety, confidence and panic--and for that matter, depression--are all psychological terms as well. Markets get jittery because investors...